Expert Opinion
Volodymyr Andriіets
analyst
Association of Milk Producers

The World Milk Crisis 2020 - what are the scenarios for future events?

The World Milk Crisis 2020 - what are the scenarios for future events? Volodymyr Andriets analyst Association of Milk Producers During the global quarantine analytical…

Dairy games of processors - there will be no winners

Three days before the New Year, dairies received notifications from processing plants to reduce the price of raw milk by 10% UNILATERALLY, without negotiations and without seeking compromises, citing unprofitable production and rising gas prices. For dairy farms, this means death.

In discussions, representatives of dairy plants use "counter-arguments": the price of milk in Ukraine has risen by 25% per year and is the highest in Europe, which is actually a manipulation of public opinion and incorrect figures. We refute these myths.

THE PRICE OF MILK HAS INCREASED BY 25% - MYTH

The weighted average price of raw milk of three varieties for the year increased by 10.7% (December to December), not 25%! The basis of the analysis is the protocols of price coordination, which the plants sign from the dairy farms with the partner factories (according to the data of more than 100 farms).

MILK PRICE IN UKRAINE - HIGHEST IN EUROPE _ MYTH

The price of Ukrainian raw milk began to rise only in July, but not throughout the year, as in European producers or in most other dairy exporting countries. The process of pricing in the domestic market corresponds to the global economic processes of milk production, and this is certainly not the desire of Ukrainian farmers to receive virtual "profits".

The faster rise in the price of raw milk, adjusted for energy and expressed in euros, actually exists only on the chart, because it is not due to the actual increase in the price in the domestic market, but to the strengthening of the national currency. Due to the change in the exchange rate since July, the price turned out to be higher than the European average. At the moment, when the exchange rate is weakening, the price of Ukrainian milk has already decreased in December. Given the forecasts of financial analysts on exchange rates, the trend will continue. In addition, such calculations use only the price of extra grade, of which only 31% is processed, ie the real price of the whole milk shaft is lower.

And finally, an issue that incites the entire dairy sector:

WHY IS POLISH MILK CHEAPER THAN CENTRAL EUROPEAN AND UKRAINIAN MILK?

Poland is a country №1 in exports of dairy products to Ukraine (trade balance -92.85 thousand dollars). The price of Polish milk remains lower than the average European and Ukrainian. The reasons are modernized and energy-efficient production of both raw materials and finished dairy products and strong subsidy support from the EU and the government. Thus, according to the website of the European Commission, in the period 2014-2020, Poland received 13.6 billion euros under the program of sustainable rural development, of which 8.7 billion from the EU and 4.9 billion euros from the government.

IS THE PROBLEM OF RISING GAS AND ENERGY PRICES EXCLUSIVELY UKRAINIAN? How to overcome the crisis in the world?

Gas tariffs are breaking historical records in the world: Germany has a 20-year high and Spain has a 30-year high. Rapid food inflation is rocking the world.

What decisions are made in the EU?

  • Producers and processors seek understanding by engaging the authorities in dialogue. Among the results: for the first time since 2006, the European Commission is amending Directive 2006/112 / EU on VAT and plans to zero the VAT rate on almost all food products, especially dairy as socially significant. And from the field to the shelf.
  • Fair trade practices of cooperation between suppliers of finished products and retail chains are established: restrictions on trade margins, as well as the share of imported products on the shelves.

Therefore, the benchmark for European raw material prices (especially Polish) in the version currently given in the "counter-arguments" of processing plants, should remain only a benchmark that must be taken into account in the development of strategies for the development of the dairy industry. A sharp decline in prices manually, disrupting the balance of market pricing, is unacceptable. In another version, in exactly the same situation tomorrow will be another part of the dairy industry - raw materials, and behind it the whole industry!

So we urge partners to operate on real facts. In such a situation, it is necessary to discuss and seek solutions together, rather than shifting the economic challenges of the entire industry onto the shoulders of farms. Only through dialogue and joint efforts can the interests of the ENTIRE dairy sector be effectively defended.


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Press service of the Association of Milk Producers